Article 1 These measures are formulated according to the requirements of Guiding Ideas for the Reform of Tax Incentives Regarding Non-tradable Shares and in accordance with laws and regulations relating foreign investment, supervision of listed companies and Temporary Measure on Foreign Investors Pu
rchasing of Internal Enterprises for the purposes of regulating strategic investments of foreign investors in A Share listed companies (listed companies in short below) after the reform of tax incentives regarding non-tradable shares，safeguarding the order of bond market, introducing advanced admin
istration experience, technology and funds of foreign countries, improving administrative structure of listed companies, as well as protecting legitimate rights and interests of listed companies and shareholders.
Article 2 these measures apply to the activities of foreign investors (investors in short below) obtaining A Share of the companies by a certain scale mid-long term strategic purchasing investment in the listed companies that have finished the reform of tax incentives regarding non-tradable shares a
nd new listed companies after the reform of tax incentives regarding non-tradable shares (strategic investment in short below).
Article 3 The investors may make strategic investment in listed companies in accordance with these measures with the approval of the Ministry of Commerce.
Article 4 The following principles shall be followed in the strategic investment:
1. abide by national laws, regulations and corresponding industrial policy, shall not harm national economic safety and social public interests;
2. persist in the principle of open, just and fair, safeguard legitimate rights and interests of listed companies and their shareholders, accept the supervision of the government, social public and
jurisdiction of Chinese judicature and arbitration;
3. encourage mid long term investment, safeguard regular order of bond market, shall not make speculation;
4. shall not hinder fair competition, shall not cause corresponding product market in China over-centralization, elimination or restrict competition.
Article 5 An investor shall meet following requirements when making strategic investment
1. obtain A Share of listed companies by transferring agreement, listed companies issuing directional new shares and any other forms as stipulated by national laws and regulations;
2. the investment may be made by stages, the proportion of the share obtained after the initial investment shall not be lower than 10 percent of the shares the company has issued except for the special provisions for special industries or with the approval of corresponding competent administration;
3. A Share of listed companies that have been obtained shall not be transferred to others within three years;
4. for the industry for which there are clear provisions by any law or regulation on the proportion of shares held by a foreign investor, the proportion of shares of the aforesaid industries held by an investor shall comply with the relevant provisions; for any fields to which foreign investment is
prohibited by any law or regulation, the investor shall not make investment in any listed company in the aforesaid field; and
5. the state share holders of listed companies shall meet corresponding regulations of administration of state assets.
Article 6 The investors shall meet following requirements:
1. foreign legal persons or other organizations established and operating in accordance with laws, have stable financial affairs, creditworthy, and ripe management experience;
2. its total real assets abroad is no less than 100 million USD or total real assets managed abroad is no less than 500 million USD, or total real assets of its parent company abroad is no less than 100 million USD or real assets managed abroad is no less than 500 million USD;
3. have perfect administrative structure and fine internal control rules, operation is standard; and
4. It (including its parent company) has no records of grave penalties by any regulatory institution both at home and abroad within the past three years;
Article 7 strategic investment by listed companies issuing shares directionally shall be handled as following procedures:
1. board of directors of listed companies adopts the resolution on directionally issuing new shares to the investors and the draft for amending companies’ rules;
2. shareholders conference adopts the resolution for issuing new shares directionally to the investors and amending the companies rules;
3. the contract signed by listed companies and the investors;
4. the listed company submits corresponding application documents in accordance with Article 12 of these measures. Where there is any special provision it shall be followed;
5. after receiving the comments on the principle about the investors’ strategic investment in a listed company, the listed company shall submit application documents for directional issuance to China Securities Regulatory Commission, China Securities Regulatory Commission shall examine and approve
the applications in accordance with laws; and
6. After completing the directional issuance, the listed company shall obtain the certificate of approval for foreign-funded enterprises at the Ministry of Commerce, and go through alteration registration at the administrative department of industry and commerce by the certificate of approval.
Article 8 Strategic investment in the form of agreement transference shall be carried out as following procedures:
1. The board of directors of a listed company adopts the agreement on investors’ strategic investment by the form of agreement transference;
2. the shareholder’s conference adopts the resolution on investors’ strategic investment in the form of transference;
3. the assignor signs share transference agreement with the investor;
4. the investor submits corresponding applications to the Ministry of Commerce in accordance with Article 12 of these measures except for special provisions;
5. the investor buying shares of a listed company shall handle share transference confirming formalities in stock exchange after obtain above approval, and register in bond registration settlement organs to apply for handling transferring formalities and report to China Securities Regulatory Commiss
ion for record; and
6. after transferring the agreement, the listed company obtains the approval certificate for foreign merchants’ investment enterprises in the Ministry of Commerce, and go through alteration registration at the administrative department of industry and commerce by the certificate of approval.
Article 9 If a investor plans to control the listed company in the form of transferring agreement, they shall submit purchasing report of the listed company and corresponding documents to China Securities Regulatory Commission after obtaining the approval in accordance with the procedure stipulated
in Article 8 (1), (2), (3) and (4), handle transference confirmation formalities in stock exchange and apply for transference registration formalities in bond registration and settlement organs after examined to be no opposition by China Securities Regulatory Commission. After that, everything is ha
ndled in accordance with Article 8 (6).
Article 10 An investor shall, when making strategic investment in listed companies, fulfill its obligations of report, announcement, and other statutory obligations in accordance with the Securities Law and the relevant provisions of China Securities Regulatory Commission.
Article 11 If an investor makes strategic investment again to the listed company in which the investor has the shares already, it shall handle it in accordance with the forms and procedures stipulated in these measures.
Article 12 A listed company or an investor shall submit following materials to the Ministry of Commerce:
1. application letter for strategic investment (see appendix 1 for the pattern);
2. plan for strategic investment (see appendix 2 for the pattern);
3. contract for directional issuance or share transferring agreement;
4. comments letter of recommendation organs (relating to directional issue) or legal suggestion letter;
5. commitment letter of investors for holding shares incessantly;
6. statements of the investor on its having no records of grave punishment by any regulatory institution both home and abroad within three years, and statements on whether it has any other record of non-grave penalties;
7. the registration certificate of the investor that has been notarized and certified according to law, and the identity certificate of the legal representative (or the authorized representative);
8. balance sheet audited by certified accountant in recent three years;
9. the materials submitted in accordance with the provisions of above (1), (2), (3), (5) and (6) shall be signed by the legal representative of the investors or his authorized representative, for the materials signed by authorized representatives, the authorization letter signed by legal representat
ive and corresponding notarized or authenticated documents shall be submitted; and
10. other documents stipulated by the Ministry of Commerce.
As for all materials listed in above sections except for Item 7 and 8, the original material in Chinese version shall be submitted. The original document and Chinese translation version of the materials listed in Item 8 shall be submitted.
The Ministry of Commerce shall give principle reply within 30 days at receipt of above materials, the period of validity for principle reply is 180 days.
Article 13 Foreign companies that meet the requirements of Article 6 of these measures (“parent companies”) may make strategic investment through their branch companies abroad under their ownership (“investors”). Besides the investors submit the materials listed in Article 12 of these measures,
the investors shall submit irrevocable commitment letter that the parent companies bear joint liability for the investment activities of the investors to the Ministry of Commerce.
Article 14 An investor shall open a foreign exchange account within 15 days from the day of principle reply of the Ministry of Commerce according to the relevant provisions on foreign investment and merger. For the foreign exchange capital remitted from overseas by an investor for the use of strateg
ic investment, the investor shall, in accordance with the relevant provisions on foreign exchange control, open a special foreign exchange account (of the category of merger) for the use of foreign investor at the foreign exchange administration at the place of registration of the listed company, th
e formalities for settlement of foreign exchange on the capital within the account and the write-off of the account shall be handled in accordance with the relevant provisions on foreign exchange control.
Article 15 An investor may go may go through corresponding formalities in securities registration and settlement organs by the approval documents the Ministry of Commerce to the investors’ investment in the listed companies and effective credentials.
As for the non-circulation shares the investors had before the Reform of Tax Incentives Regarding Non-tradable Shares or before the listed companies first public issue, the securities registration and settlement organs may open a securities account for them according to the investor’s application.
The securities registration and settlement organs shall formulate corresponding regulations in accordance with these measures.
Article 16 An investor shall start strategic investment activities within 15 days at the date of settlement of exchange, and finish strategic investment within 180 days at the date of principle reply.
If an investor could not finish strategic investment according to strategic investment plan within the time limited, the principle reply from the examination and approval authority shall lose efficacy automatically. The investor shall buy the exchange and remit the funds (RMB) obtained after settlem
ent of exchange out of China with the approval of Foreign Exchange Bureau within 45 days at the date of the principle reply
Article 17 After completing a strategic investment, the listed company shall obtain the approval certificate for foreign merchants invested enterprises in the Ministry of Commerce within 10 days by following materials:
1. application letter;
2. principle reply letter of the Ministry of Commerce;
3. certificate for share holding provided by securities registration and settlement organs;
4. business license of the listed companies and the credentials of legal representative; and
5. rules of the listed companies.
The Ministry of Commerce shall issue the approval certificate for foreign merchants invested enterprises within 5 days at the receipt of above materials, and give the indication of “foreign merchants invested joint stock company (merger of A Share).
If an investor obtains 25 percent or more shares of the single listed company and commits the share holding no less than 25 per cent within 10 years, the Ministry of Commerce shall give a indication of “foreign merchants invested joint stock company (merger of A shares of 25% or more)” in the issu
ed approval certificate.
Article 18 A listed company shall, within 30 days from the day of issuance of the certificate of approval for a foreign-funded enterprise, apply for handling alteration registration on the type of company to the administrative department of industry and commerce, and submit the following documents:
1. application letter for alternation signed by legal representative of the companies;
2. approval certificate for foreign merchants invested enterprises;
3. share holding certificate provided by securities registration and settlement organs;
4. certificate for the investors opening business legally with a notary and attestation; and
5. other materials stipulated by State Administration for Industry & Commerce.
For the change that is examined and approved, the industrial and commercial administrations shall write down the words “foreign merchants invested joint stock company (merger of A Share) in the column of business license type. If the investors obtained 25 percent or more shares of the listed compan
ies in their strategic investment and promise to hold shares no less than 25 per cent within 10 years, “foreign merchants invested joint stock companies (merger of Share 25 per cent or more)” shall be remarked.
Article 19 A listed company shall go through corresponding formalities in taxation, customs, foreign exchange administration and other corresponding organs within 30 days at the date of issuing business license for foreign merchants invested enterprises. Foreign exchange administrations shall make r
emarks “foreign merchants invested joint stock companies (merger of A Share) on foreign exchange registration card that will be issued. If the investors obtain 25 per cent or more shares of single listed companies in strategic investment and promise their share holding is no less than 25 per cent w
ithin 10 years, foreign exchange administrations shall make remarks as “foreign merchants invested joint stock companies (merger of A Share 25 per cent or more) on foreign exchange registration card.
Article 20 An investor shall not buy and sell bond (except for B Share) except for following circumstances:
1. The A share stock of a listed company held by the investor for making strategic investment may be sold after the expiry of shareholding period in its promise;2.
2. In case the investor makes purchase by offer in accordance with the relevant provisions of the Securities Law, it may purchase the shares sold by A share shareholders of the listed company within the period of the offer;
3. Non-tradable shares hold by the investors before the reform of the Reform of Tax Incentives Regarding Non-tradable Shares of the listed companies may be sold after the Reform of Tax Incentives Regarding Non-tradable Shares and at the expiration of selling limit;
4. The shares held by the investors before the listed companies public issued for the first time may be sold at the expiration of the selling limit; or
5. Before the expiry of the share holding period as promised by an investor, if there is necessity to transfer its shares due to its bankruptcy, liquidation, or mortgage, or other special reasons, it may transfer its shares upon the approval of the Ministry of Commerce.
Article 21 In case an investor reduces its shares, which makes the foreign capital share of a listed company less than 25%, the listed company shall make archival filing within 10 days to the Ministry of Commerce, and go through the relevant formalities for alteration of the certificate of approval
for foreign-funded enterprises.
In case an investor reduces its shares, which makes the foreign capital share of a listed company less than 10%, and the investor is not a single largest shareholder, the listed company shall go through the formality for the change at the industrial and commercial administration and go through the r
elevant formalities for writing off the certificate of approval for foreign-funded enterprises within 10 days.
Article 22 In case an investor reduces its shares, which makes the foreign capital share of a listed company less than 25%, the listed company shall go through alteration registration at the industrial and commercial administration within 30 days from the day when the certificate of approval for for
eign-funded enterprises is altered, and the industrial and commercial administration shall change the enterprise type in the business license into “foreign-funded joint stock company (merger of A shares)”. The listed company shall go through registration on foreign exchange alteration at the admin
istrative department of foreign exchange within 30 days from the day when the business license is altered, and the administrative department of foreign exchange shall note “foreign-funded joint stock company (merger of A shares)” in the foreign exchange registration certificate.
In case an investor reduces its shares, which makes the foreign capital share of a listed company less than 10%, and the investor is not a single largest shareholder, the listed company shall go through alteration registration at the industrial and commercial administration within 30 days from the d
ay when the certificate of approval for foreign-funded enterprises is written off, and the enterprise type shall be altered into a joint stock company. The listed company shall go through formalities for the cancellation of the registration at the administrative department of foreign exchange within
30 days from the day when the business license is altered.
Article 23 As for the parent companies making strategic investment through their branch companies outside of China owned exclusively and having finished he investment, the parent companies shall report to the Ministry of Commerce before they transfer above branch companies outside of China, and make
an application in accordance with the procedures listed in these measures. New assignee shall also meet the requirements stipulated by these measures, bearing the whole rights and duties of the parent companies and their branch companies in the listed companies, and submit report and announcement t
o China Securities Regulatory Commission and perform other legal duties.
Article 24 In case an investor assigns the shares of a listed company held by it through A share market, it may make application for remitting out the foreign exchange it has purchased to the administration of foreign exchange at the place of registration of the listed company upon the strength of t
he following documents:
1. written application;
2. The documents of approval for exchange settlement approved by the administration of foreign exchange on the capital within the special foreign exchange account (category of merger) opened for the use of a foreign investor to make strategic investment;
3. The documents approved by the Ministry of Commerce for alteration of the stock right structure of the listed company; and
4. The certificate documents of relevant securities transaction issued by a securities brokerage institution.
Article 25 For the listed companies that the rate of shares hold by the investors is lower than 25 per cent, their borrowed foreign debts shall be handled in accordance with related regulations about borrowed foreign debts of Chinese invested enterprises.
Article 26 Corresponding staffs of the government organs shall be devoted to their duties, perform their obligations in accordance with laws, shall not seek improper interest by making use of the convenience of their position, and have the duty to keep confidential of the commercial secrete they kno
w.
Article 27 The investors in Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan region make strategic investment shall handle in accordance with these measures.
Article 28 These measures shall go into effect 30 days after the day of promulgation.
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